On Constraining Fiscal Policy Discretion in EMU

Antonio Fat·s and Ilian Mihov

Oxford Review of Economic Policy, 2003, vol. 19, issue 1, 112-131

Abstract: We review the theoretical and empirical literature on the benefits and costs of imposing restrictions on fiscal policy. We emphasize that the arguments in favour of restricting discretion of fiscal policy go beyond the notion of avoiding unsustainable budgetary plans that can lead to pressure on the central bank. Restrictions on fiscal policy can also be justified on the grounds that discretionary changes in spending or taxes can lead to unnecessary volatility in output and lower economic growth. Empirically, there is evidence that implicit constraints on governments can be as effective as explicit constraints (i.e. rules). From the analysis in EMU countries in the last 10 years we conclude that there has been a significant change in the conduct of fiscal policy in terms of increased discipline and less use of discretion. However, since 1999 there are clear signs of fatigue in this process as previous trends have either stopped or even reversed. Copyright 2003, Oxford University Press.

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (50)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxford:v:19:y:2003:i:1:p:112-131

Access Statistics for this article

Oxford Review of Economic Policy is currently edited by Christopher Adam

More articles in Oxford Review of Economic Policy from Oxford University Press and Oxford Review of Economic Policy Limited
Bibliographic data for series maintained by Oxford University Press ().